Revocable Trust (Living Trust) 

A Living Trust is a revocable trust agreement, created during life, that is established by three parties. You are (typically) all three parties in this agreement – the Trustor, the Trustee and the Beneficiary. As trustor of a revocable living trust, you retain the ability to amend, revoke, or change the terms of the trust agreement, in its entirety, at any time. If you decide that you no longer want to give assets to a specific beneficiary, you can remove or replace that beneficiary. This level of control is usually a desirable advantage to the Living Trust. It is important to note however, that this type of trust does not, on its own, encompass total asset protection when it comes to creditors. A good rule of thumb is – if you can access the asset, so can your creditors. If long-term care protection or preparing for the rising cost of the nursing home is your concern, you may want to learn about the irrevocable asset protection trust.

PROBATE AVOIDANCE

The only fool proof way to avoid probate is with a fully funded trust.
Probate is a court process by which your assets are transferred to your heirs after your death. Anything titled in your name at the time of your passing must go through the probate process. There are three major disadvantages of probate. 

• Probate is Costly. Ask anyone who has had to open a probate for someone – it is a stressful financial burden to your heirs. They will have to hire an attorney to facilitate this legal process in a court of law so there will be attorney fees and court fees. In Tennessee, the average cost of probate ranges from 2% – 5% of the estate’s value.

   

• Probate Takes Time. In Tennessee, the average probate process takes, on average, anywhere from 12 to 16 months. During this time, your heirs have limited to no access to their inheritance. This can cause major problems for those who have left minor children behind or have heirs with special needs.

   

• Probate is Public. Anyone, and I mean anyone, can go to their local courthouse and view the open probate cases in the public record. They have access to the value of your estate and, if you had a Will, who you left everything to. Some view this as being a lot of personal information available to the public.
   

DISTRIBUTION CREATIVITY

If you think about the ideal way in which you would like your assets to be passed on to your heirs, it may not be as cut and dry as you would think. With a Trust, you can dictate, down to the tiniest of details, exactly how you want your assets distributed (or not distributed) to your heirs. Let’s look at a few common examples:

• Divorce Proofing
  Everyone is in love when they get married. I’ll give you a personal example. My daughter is married and I adore my son-in-law. However, if something happened and divorce ever became a reality for them, I would not want my daughter’s adversarial spouse to be walking away with half of her inheritance. With a Trust, you can “divorce proof” the assets that you leave to your married children. You can go so far as to dictate the distribution based on the terms of the divorce. For example: If they split amicably, the in-law is entitled to a percentage of your child’s inheritance. If they are adversaries in divorce, the in-law is entitled to none of your child’s inheritance. You can really use your imagination and protect your inheritance in any way you desire.

   

• Child or Heir with Addiction Issues
  Many parents come to me and say they want one of their kids to have an equal share in their inheritance, but only if they have kicked their addiction or only if they have been clean for x number of years….etc. This is never out of malice, but out of protection. A large sum of money in the hands of an addict is sure to add fire to the flames and most parents want to protect their struggling child from this temptation. There are many ways we can have a trust moderate and ensure your inheritance is left safely to a child with an addiction issue.
  

   

• If / Then Stipulations
  Another scenario we often encounter is what we call an “If / Then Stipulation”. You can tie strings to your distribution or you can create terms and conditions. If you complete at least two years of college, then you will receive your inheritance. When you turn 30 you gain access to 50% of your inheritance and when you turn 40 you gain access to the remaining 50%. If you sell the house / family farm then the family must be given the first opportunity to purchase the land. Once again, the possibilities in stipulating the distribution of your estate are quite literally endless.

   

PLANNING FOR INCAPACITY or LONG TERM CARE

If you plan in advance with an Asset Protection Trust, you can plan for your incapacity or long-term care needs. Why is this kind of asset protection important? A nursing home, in the State of Tennessee, costs upwards of $325/day. That’s more than 10k every month! At this exorbitant rate, a lifetime’s worth of assets can be depleted in just a couple of years. If this type of protection is intriguing to you, click here to learn more about the Asset Protection Trust and learn how this type of planning tool could best serve you and your family.